EVOLUTIONARY DECISION TREES FOR STOCK INDEX OPTIONS AND FUTURES ARBITRAGE How Not To Miss Opportunities

EDDIE-ARB (EDDIE stands for Evolutionary Dynamic Data Investment Evaluator) is a genetic program (GP) that implements a cross market arbitrage strategy in a manner that is suitable for online trading. Our benchmark for EDDIE-ARB is the Tucker (1991) put-call-futures (P-C-F) parity condition for detecting arbitrage profits in the index options and futures markets. The latter presents two main problems. (i) The windows for profitable arbitrage opportunities exist for short periods of one to ten minutes. (ii) From a large domain of search, annually, fewer than 3% of these were found to be in the lucrative range of £500£800 profits per arbitrage. Standard ex ante analysis of arbitrage suffers from the drawback that the trader awaits a contemporaneous signal for a profitable price misalignment to implement an arbitrage in the same